Jeremy Hunt ‘looking at changing’ Lifetime ISA rules – what it would mean for you
Jeremy Hunt is reportedly considering changing the Lifetime ISA property cap rules
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Chancellor Jeremy Hunt is reportedly considering changes to the government-backed Lifetime ISA (LISA) and Help to Buy ISA ahead of the upcoming Autumn Statement.
Treasury sources say Mr Hunt is looking at lifting the limit on the cost of the property, after average house prices in parts of the UK have surged beyond it in recent years, according to the Financial Times.
It would mean savers looking to purchase in places such as London may no longer find the purchase doesn’t meet the rules for buying a first home with Lifetime ISA or Help to Buy ISA savings.
The Chancellor could also potentially introduce a new ISA product for first-time buyers following the closure of the Help to Buy scheme.
The Lifetime ISA and Help to Buy ISA offer a 25 per cent government bonus for first-time buyers
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Both the Lifetime ISA and Help to Buy ISA offer a government bonus of 25 per cent, although the rules and amount that can be saved in the accounts differ.
A Help to Buy ISA can no longer be opened, but those with an account can pay into it until November 2029, and claim the bonus until November 2030.
To get the Help to Buy ISA bonus, the property must have a purchase price of up to £250,000, or up to £450,000 in London, meaning some first-time buyers have been unable to claim the support for the property they want.
Among the Lifetime ISA rules, to use the savings towards buying a first home, the property being purchased must cost £450,000 or less.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said a shift in the LISA price cap would be “incredibly welcome”.
She said: “Runaway house price rises over the past five years have rendered the £450,000 limit much less generous than it was back in 2018.
“While you can still stretch to the average UK property – costing £291,000, Londoners would find the average home well out of reach, at £536,000.”
Ms Coles warned Lifetime ISA savers who want to buy a property costing more than £450,000 would be hit by a charge for withdrawing their savings from the account.
She explained: “If you want to buy somewhere more expensive, you’re hit with a punitive 25 per cent penalty – eating into your deposit at a time when you can least afford it.
“Pushing up the limit, and ensuring it keeps pace with house prices in future, would be eminently sensible.
“It should go hand-in-hand with a cut to the penalty to 20 per cent - so essentially all you’d lose if you bust the budget would be the government bonus.”
However, Ms Coles said the rumours about “yet another ISA” were “worrying” amid plans for ISA simplification.
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First-time buyers in London face buying a property which exceeds the Lifetime ISA cap due to high house prices
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She said: “If the plan is to simplify and streamline the range, adding more different types of ISA risks bringing another layer of complexity.
“The LISA has helped over 171,000 people onto the property ladder, supporting deposits of £2billion.
“It has also helped hundreds of thousands start their savings and investment journey, forming habits which will help them build their resilience over the longer term. That’s not to be sniffed at. The Treasury doesn’t need to throw the baby out with the bathwater.
“Some tweaks to the LISA will give a huge head start to anyone saving for a property or for retirement.”
The maximum a person can pay into a Lifetime ISA each tax year is £4,000, with the government boosting these savings with a 25 per cent bonus.
This £4,000 limit is included within the £20,000 annual ISA allowance for all four types of ISA.
GB News has contacted HM Treasury asking for comment.
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